30 September 2014

Today’s sport business is far away from the
status it once had. Professionalization and commercialisation are the terms
that dominate many of nowadays sports leagues in different countries. Therefore
it is hardly surprising that numerous teams passed the one billion dollar mark
in terms of team value, like Manchester United ($2,23 billion), Real Madrid
($1,88 billion) or the New York Yankees ($1,85 billion). Clubs that participate
in the world’s most famous competitions generate annual incomes that are easily
comparable with medium and large-sized enterprises. One major source of
revenue, for nearly all professional sports clubs, is the profitable
commercialisation of their brand and their media presence through sponsorship
agreements with different kinds of companies.

On the other side there are commercial
companies that seek, pressured through the increasing competition among many
markets, for effective ways to communicate and build their brands. Those
companies are often willing to pay high amounts of money in order to associate
their products and brands with a sport club, athlete or sport event.

Despite this obvious potential for sport
clubs, many of the North American sport leagues have reservations towards
particular forms of sport sponsorships. However, sponsorships are common tools
in multiple areas like music, arts, culture in general and sports, whereby
sport sponsorships are nowadays highest developed scope of sponsorships with an
quota of between 50 and 70% of all sponsorships worldwide being associated with
the sport business in 2005.

But why is this form of sponsorships so
famous? The reasons for the rising and distinctive interest in sport
sponsorships are diverse. Circumstances like an increasing public interest in
sports, leading to high media coverage, as well as the growing amount of brands
that target sport-lifestyle consumers could be considered as major reasons. On
the other hand many companies seek for more effective marketing measures
compared to traditional and less effective advertisings.

Shirt Sponsorships

Generally there are three established
patterns in shirt sponsorships. The logo-free approach is mainly used in the
North American major leagues and implies that there are no logos from sponsors
on the player’s shirts. The restrained approach comprises for instance most of
the European football leagues and is characterised through strict limitations
on quantity and size of logos. The last group is called the unrestrained
approach and gives nearly no restrictions about the number of logos. This
approach is mainly followed in European ice hockey. Shirt sponsorships are a
common sponsorship tool in most European top leagues. That is mainly because
companies pay high amounts of money for the rights to display their logos on the
shirts of the clubs. Because these deals are a valuable source of revenue and
shirt sponsorships are widely accepted among the European fan scene, in the
three big football leagues, Bundesliga, Premier League and La Liga (Liga BBVA),
mostly all participating teams have currently contracts with shirt sponsors, or
are actively searching for them. The latest record-breaking commitment was
announced between Manchester United and the car manufacturer Chevrolet at the
beginning of 2014. Chevrolet will replace the current shirt sponsor Aon from
the upcoming season for an amount of $79.85 million per annum.

(Shirt) Sponsorships in the NBA

Based on facts like a high media coverage
and a large public interest the NBA could be described as highly appealing and
therefore as an suitable candidate for shirt sponsorship agreements. However, a
comparison of the NBA with the European approach shows that the NBA seems to be
much more restricted in terms of sponsor’s visibility. This is mainly due to
the strong tradition of many sports in America as well as the fear of negative
responses from the public. On the other hand there is the fact that teams are
not invulnerable against financial issues like the Lockout situation of the NBA
in 2011 demonstrated. This fact together with the financial interests of
franchise owners and shareholders led to a first slightly rethinking of the NBA
officials in terms of shirt sponsorships. Undoubtedly the decision for or
against logos on players’ shirts is associated with pros and cons or in other
words several risks and challenges. If and in how far the NBA is willing to
take these risks in return for higher revenues, as well as the question whether
supporters and fans would react in a negative way has not been proofed or
decided yet. However that be, before making final decisions the NBA should
conduct comprehensive researches on that issue.

The attached paper was submitted to Coventry
University in March 2014 as part of the assessment requirements. It gives an
overview about the theory of sponsorships in general including objectives and
risks and challenges for sponsors and sponsees and summarizes some useful
statistics about the value of sport sponsorships in Europe. Furthermore the
paper discusses the issue of shirt sponsorships in most North American major
leagues using the example of the NBA and compares the North American with the
European approach. Please feel free to download this work for future
references.

The Author

Jonas Ratajczak holds a Master of Arts (MA) with distinction degree in Sport Marketing from Coventry University (UK) and a bachelor's degree in Sport Management (BA) from Germany. This blog is used to publish sport business related contents.